Effland, a shareholder at Ogletree, Deakins, Nash, Smoak & Stewart's Indianapolis office, made his remarks at the recent Society for Human Resource Management Conference and Exposition in San Diego.

Hoping to soften the blow of downsizing, many businesses called the economic decision to terminate employees a “layoff.” And many organizations utilized the (necessary) layoffs to divest themselves of underperforming or problematic employees. Presuming such actions were not mere pretext for illegal discrimination, there is no law that prohibits solving two problems at once by RIFing troublesome employees, Effland says.

Unfortunately, however, employees who were “laid off” tend to believe that the company intends to call them back first when the economy turns around. For a variety of reasons, however, companies may not want to rehire many of the displaced workers. While there is no legal obligation to do so (barring a contractual provision to the contrary), employees may challenge a refusal to reinstate them from a “layoff,” particularly if they see their jobs being taken by applicants of a different race, gender, age, etc.

To discourage this, says Effland, companies should approach hiring following the recession in a manner very close to hiring at any other time: Review applications, interview qualified candidates, and hire the most qualified. This both gives tangible justification for any employment action taken and minimizes the likelihood of any discrimination claims gaining traction.

As the company brings back former employees, it must be ready to tackle some tough questions. For example:

Time of service. What will the company do when time of service questions arise? An employee who is rehired after being laid off may argue for treatment as a long-term employee for purposes of increased benefits (such as an extra week of vacation) or salary.

Retirement plans. There may be ramifications on employees’ participation in retirement plans, i.e., despite being treated as a “new hire,” an employee may nevertheless be immediately eligible to re-enter the company’s qualified retirement plan.

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ADA issues. Imagine an employee who worked in a position with a 50-100 pound lifting requirement. When originally hired, the company required a post-offer medical examination compliant with the ADA to determine if he could perform the work functions.

Even if the employee, before the layoff, never showed any evidence of a disability, the company is within its rights to require another exam—but what happens if the employee now cannot pass? While the law suggests the company did nothing improper (assuming the test meets the EEOC’s guidelines for such exams), it may nevertheless lead to legal issues by a now-disgruntled former employee.

Continuation of status. Also, keep in mind that certain laws may require a continuation of status from before the layoff, at least to some degree. For example, the Family and Medical Leave Act’s implementing regulations state that only separations of 7 years or more require a returning employee to satisfy the “12 months of employment” prong of the eligibility test. Thus, if a company is covered by the FMLA, any employee that was employed for a sufficient period of time during his or her prior period of employment and leaves for less than 7  years is eligible for FMLA leave once s/he hits the 1,250-hour mark—which typically happens after about 7 months of full-time employment.

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